The coming collapse of the Chinese economy is inevitable.

Xi Jinping’s zero Covid policy has killed off a large swathe of Small Medium-sized Enterprises (SMEs); local governments like Guizhou have unofficially declared bankruptcy and a lot of foreign firms have moved or are moving their manufacturing to other jurisdictions. The real estate bubble has effectively popped and the government cannot do anything about it. What most people don’t realise is that China’s economy hasn’t really grown that much in the last decade. The GDP growth of 8% on average has been reported over the last decade but most people forget that the 8% is not real growth; that 8% is predominantly asset appreciation (e.g. property prices going up). It was reported that 68% of the GDP growth is from property price increases.

State-Owned Enterprise are grossly inefficient and serve only one purpose – to support the government to control the people; but 80% of the economy is actually supported by SMEs and they were left out to dry during Covid and many have been wiped out and will never return.

Without providing further reasons for the inevitable collapse of the Chinese economy – let us focus on what will happen when it does happen and how you should prepare yourself for it.

When the Chinese economy collapses so will the Communist Party because they can no longer pay people to suppress the population and the cost of policing the Internet becomes too expensive and there will be a complete meltdown in its legitimacy. China will because federated; so all the provinces would effectively become their own states and be governed semi-autonomously – a little bit like America. There will be hyper-inflation as the country transitions from a dictatorship to a more representative government because a lot of money would need to be printed to deal with the hole created the Communist Party. There will likely be a change in the currency.

The developed world will suddenly find itself on the back foot and realise how dependent it had become on manufacturing and outsourcing to China. The cost of a lot of goods would suddenly go up and multi-nationals who invested in China heavily would be badly burnt and some even having to file for bankruptcy. The inflationary pressure on the rest of world would be short-lived as new manufacturing hubs are found.

For the individuals living outside of China, the collapse of the Chinese economy will bring positive change especially for the environment, less Chinese money into any country would generally be beneficial to the every day people and the world return to a normal place.

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